Gratuity can be forfeited under Section 4(6)(a) of the Payment of Gratuity Act if an employee's actions cause financial loss to the employer, even without a criminal conviction.

Judgment:

1) The issue involved in the present Petitions is whether Petitioners, who have pocketed commission by floating fictitious firm in the names of their wives while procuring spare parts at exorbitant rates, are entitled to gratuity after termination of their services?

2) Petitioners have filed these Petitions challenging the judgments and orders dated 24 March 2023 passed by the Appellate Authority under the Payment of Gratuity Act and In-charge Member, Industrial Court, Thane, allowing the appeals preferred by Respondent-employer and setting aside orders dated 18 April 2022 passed by the Controlling Authority under the Payment of Gratuity Act and Judge, First Labour Court, Thane. The Controlling Authority had allowed applications preferred by the Petitioners and had held that they are entitled to gratuity from the Respondent-employer together with interest @10% per annum from the dates of their resignations. The Appellate Authority has held that Petitioners are not entitled to gratuity and accordingly Petitioners have filed the present Petitions challenging the orders passed by the Appellate Authority.

3) Briefly stated, facts of the case are that Respondent is engaged in the business of manufacturing and selling machinery, equipment and accessories primarily for pharmaceutical industries. It has set up manufacturing facilities where the parts and equipment are manufactured. Manufacturing of some of the parts are also undertaken from outside sources. Petitioners were employed with the Respondent-employer in following capacities:

4) It is the case of Respondent-employer that a partnership firm was floated by the wives of the four Petitioners in the name of M/s. Meck Kraft Industries and in absence of any manufacturing facilities of the said Firm, Petitioners procured the goods manufactured by M/s. Samurai Engineering through M/s. Meck Kraft Industries and earned huge profits without any investment. It was alleged that components manufactured by M/s. Samurai Engineering were procured by Petitioners through the Firm of their wives at 200% to 300% costs and thereby caused huge financial loss to the employer. Petitioners tendered the resignations on various dates as under:

5) The employer issued communication dated 11 October 2018 to the Petitioners accusing them of indulging in activities against the interest of Respondent-company and expressed desire to hold enquiry. Petitioners were directed to proceed on leave until further orders. Petitioners were thereafter issued letters dated 5 November 2018 alleging that they caused losses to the Respondent-company to the tune of Rs.50 lakhs and asked them to show cause as to why the gratuity should not be forfeited to the extent of the amount of losses caused. By orders dated 14 November 2018, Respondent-company terminated their services. Since no reply was received to the show cause notices, the gratuity was forfeited in addition to liberty for recovery of the amount of losses caused to the company. Simultaneously, Respondent-company lodged FIR against Petitioners and their wives on 20 September 2018 with Rabale MIDC Police Station.

6) Petitioners did not question their terminations. However, they filed applications before the Controlling Authority for payment of gratuity. The applications were resisted by the Respondent-company by filing written statements. In the meantime, investigations were conducted by the police and final report was filed on 23 November 2019 opining that the Firm of wives of the Petitioners (M/s. Meck Kraft Industries) had received amount of Rs.11,90,244/- from the Respo